Gold prices, as with any other market price, will fluctuate and that is to be expected. What is more important is that, historically and in the long term, gold has maintained an upward trend. As a result, gold is often considered a hedge against inflation. Inflation occurs when prices rise and, in the same way, prices rise as the value of the dollar falls.
As inflation increases, so does the price of gold. In international markets, gold is traded in USD. When you import USD it is converted to INR. Therefore, any fluctuation in the USD or INR may affect the import price of gold and, therefore, the selling price.
The Indian rupee has fallen sharply since the blockade. It is currently around 75 against the US dollar. Since India is the second largest importer of gold, these exchange rate fluctuations affect gold prices. Gold prices may fluctuate due to fluctuations in currencies, particularly the US dollar.
The US dollar has an inverse relationship with gold. The US dollar is the world's reserve currency and is possibly the most commonly used denomination. When the value of the U.S. dollar falls, gold prices rise because the rest of the world's currencies gain value.
When interest rates fall, people don't get good returns on their deposits, causing an increase in demand for gold and, therefore, in the price. As a result, gold is often used as a hedge against inflation, since it effectively retains its value regardless of economic conditions; this is said to be one of its advantages. In recent weeks, the increase in the number of coronavirus cases, the increase in tensions between the United States and China and the general economic slowdown have led to a steady increase in gold prices around the world. So, if you're wondering why the price of gold is rising, supply and demand conditions may be one of the reasons.
Even if high rates of inflation last for an extended period, gold acts as a perfect hedge, since it is not affected by fluctuations in the value of the currency. Nowadays, gold is sought, not only for investment purposes and to make jewelry, but it is also used in the manufacture of certain electronic and medical devices. Gold is also in demand from exchange-traded funds that own the metal and issue stocks that investors can buy and sell. On the other hand, when interest rates rise, people sell their gold and invest in deposits for high interest, causing demand and price to fall.
Useful resources, such as Gainesville Coins, track the spot price of gold so you're always aware of changes in the price of gold. Major players in gold mining around the world include China, South Africa, the United States, Australia, Russia and Peru. Things such as your affinity for risk and your preferences affect the way you would like to structure your assets and holds, including gold. Therefore, gold prices may be affected by the basic theory of supply and demand; as demand for consumer goods such as jewelry and electronics increases, the cost of gold may increase.
While demand increased, gold mining activities were seriously affected by blockades in several countries.